People may have any number of reasons, good or bad, for placing assets they have paid for in others’ names. However, as a High Court ruling underlined, without appropriate legal protections such arrangements are anything but risk free.
A householder with previous experience of renovating properties paid £230,000 for a building plot at the end of his garden. He had a good relationship with a builder who agreed to contribute his labour in developing the plot. Any profit generated by the joint venture was to be split equally between the householder on the one hand, and the builder and his wife on the other.
The plot was, however, bought in the sole name of the builder’s wife. The purchase monies provided by the householder were described as a loan. Those arrangements were entered into in the hope that the wife would be considered a first-time buyer, thereby achieving a modest saving in Stamp Duty Land Tax (SDLT). In the event, no such saving was sought and SDLT due on the transaction was paid in full.
After relationships soured, the development did not proceed. The householder later launched proceedings with a view to having the plot transferred to him and re-registered in his name. The couple resisted his claim but it was upheld by a judge who found that he was the plot’s sole legal and beneficial owner.
Ruling on the couple’s challenge to that outcome, the Court emphasised the risks involved in the transaction. In the absence of a professionally drafted deed of trust, the owner’s position as beneficial owner was unrecorded and unprotected. Although there was, in the event, no attempt to mislead HM Land Registry or to avoid paying about £2,000 in SDLT, any such attempt would have been fraudulent.
Dismissing the appeal, the Court ruled that the householder was the plot’s true purchaser. The money he had provided was not a loan, although it was labelled and dressed up to appear as such. As he had paid the entirety of the purchase price, the builder’s wife held legal title to the plot under a resulting trust for his benefit and was thus obliged to transfer it into his name for nil consideration.
The result of the case was consistent with the mutual understanding of all involved in the transaction and the spirit of the intended joint venture. Any other outcome, the Court found, would be disproportionate and work a palpable injustice on the householder.